27 Facts About The World Economy That Every Investor Should Know
There were nearly 2 million new high net worth individuals (HNWI) in 2013. But the changing global landscape makes it more complicated for both affluent and mass affluent investors.
US Trust put out a report titled 101 Things Every Investor Should Know About The Global Economy earlier this year. Inspired by the report, we drew on some key global themes in terms of investment, trade, output, competitiveness and asset performance to pull together 27 key themes for investors.
We look at the importance of foreign direct investment, growing sovereign wealth funds, disruptive technologies, and total returns that investors should keep an eye on.
These themes can help guide investors in seeking out opportunities, both geographically and in terms of asset class.
Note: The charts are not taken from US Trust.
Developing nations are a bigger source of global demand than developed countries. This means emerging market consumer trends are becoming more prominent and this is bullish for U.S. multinationals.
Income inequality has increased after the global economic crisis. But faster economic growth in emerging countries can help lower inequality.
Stocks have outperformed every other asset in the long-run. In shorter, specific periods however this can vary. Meanwhile, cash is in fact not king as it struggles to keep pace with inflation.
Global urban dwellers have surpassed rural dwellers for the first time ever. This suggests that infrastructure expenditure around the world will balloon as urban populations continue to grow.
The U.S. is now back to their pre-recession peak. Despite concerns that it has lost manufacturing jobs to China, employment has been ticking up in recent year.
Wage inflation in China has picked up, causing it to lose its manufacturing edge to countries like Vietnam, Cambodia and the Philippines. We're also starting to see manufacturing come back to developed countries.
Switzerland has been the most globally competitive country for the last five years. This is because of its strength in terms of innovations, its investment in research and development, and stable macroeconomic environment.
Norway is the most productive country. This is significant, because productivity can act as a driver of corporate profits and standards of living.
Singapore, Hong Kong, and New Zealand rate highest on ease of doing business. This is crucial to GDP growth because it makes economies more competitive.
Global corporate tax rates are higher in the U.S. than Europe or Asia. Tax competitiveness is key in terms of economic competitiveness. Companies in large part determine where to channel their foreign direct investment based on corporate tax rates.
Israel spends more on research and development than the rest of the world. Innovation is also key to increasing a nation's economic competitiveness.
There are vast differences in how much countries spend on healthcare. The U.S. spends 17.9% of GDP, or about $8,400 per person per year. Global public healthcare spending is projected to double over the next 50 years to about 14% of GDP.
The U.S. dollar's reign as reserve back currency will continue for at least 10 years. Despite talk of the renminbi emerging as a potential reserve currency, it has some way to go.
The volume of global foreign exchange trading is at a record high. The Mexican peso and the renminbi are climbing the ranks.
Immigrants are becoming increasingly important for economic competitiveness, especially as many developed countries are seeing declining birth rates.
Disruptive technologies have helped global growth and improved living conditions. Here are 12 disruptive technologies with huge implications for growth.
America's largest commercial arteries, based on trade and foreign affiliate sales, are more complex than just what the trade data suggests. Foreign direct investment is a huge part of U.S. foreign commerce and investors need to look at trade and foreign affiliate sales.
U.S. foreign affiliates are significant exporters and they are not in low-cost places. They are primarily in Europe, Singapore, and Canada. With a large geographic footprint U.S. foreign affiliates are are poised to do well.
The U.S. still takes the top spot in the foreign direct investment confidence index.
China is the largest foreign holder of U.S. Treasuries. The substantial foreign holdings of U.S. Treasuries suggests that America's financial well-being is increasingly reliant on international investors.
The U.S. is seeing rising net interest payments on its debt. "The US now spends more servicing its debt that on many key government programs," according to US Trust.
Sovereign wealth funds grew as a result of 2003-2007 commodity boom, and Asia and the Middle East tend to dominate. SWFs were a significant source of capital for Western financial institutions during the crisis and there has been concern that their motivations are more political than economic.
Developing countries are some of the biggest national savers. This is crucial to economies as this allows for sustainable growth, because it keeps them from relying to much on international sources for funding.
Education and skills are the most important component of economic competitiveness. There are pretty stark differences in unemployment rates and earnings depending on the level of education.
Chinese stocks have lagged the U.S., even though GDP growth in the former has significantly outpaced America. This means Chinese citizens will be doing better than those invested in its stock market.
There has been a rise in global stock market correlations. Correlation is higher among developed countries than developed and emerging nations. Interestingly rising correlations have reportedly stemmed from a demand for diversification.
Long-term investors should focus on dividends. "Dividend reinvestment accelerates price gains and dampens price losses, resulting in a better investment experience," according to US Trust.
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